1 (a) What is the common agency problem faced by shareholders? Describe TWO (2) situations in which stockholders can ensure that management's and stockholders' interests are aligned? (b) You are a finance director of a company in need of capital for future growth opportunities. Based on your knowledge and experience, advise your Chief Executive Officer THREE (3) different ways in which capital can be obtained from suppliers of capital. Question 3 (a) In your opinion, what is the importance for an individual in understanding time value of money concepts? For a corporate manager? (b) You have RM1,500 to invest today at 7% interest compounded annually. (i) How much will you have accumulated in the account at the end of the following number of years? - 3 years - 6 years - 9 years (ii) Use your findings in part (b)(i) to calculate the amount of interest earned (in RM) in the: - 1st 3 years (years 1 to 3) - 2nd 3 years (years 4 to 6) - 3rd 3 years (years 7 to 9) (c) You just won a lottery that promises to pay you RM1,000,000 exactly 10 years from today. Because the RM1,000,000 payment is guaranteed by the state in which you live, opportunities exist to sell the claim today for an immediate lump-sum cash payment. What is the least you will sell your claim for if you could earn the following rates of return on similar-risk investments during the 10-year period? (i) 6 % (ii) 9 % (iii) 12 % XYZ Company is evaluating 2 projects (in which only one may be accepted) with an expected life of 3 years. The initial investment for either projects are RM1,000,000 each. These are the following net cash inflows: - Project 1 (RM) Project 2 (RM) __________________________________________ Year 1 300,000 600,000 2 1,000,000 600,000 3 400,000 600,000 The cost of capital is 10%. Depreciation for the projects is calculated on a straight-line basis. Both projects have no resale value at the end of their useful lives. Required: (a) Calculate the net present value (NPV) of both projects. (b) Calculate the payback period for both projects. (c) Calculate the accounting rate of return for both projects. (d) Based on your evaluation in parts (a) - (c), which project would you recommend the company to invest in? Give TWO (2) reasons why. (e) What are TWO (2) non-financial reasons to consider when recommending which project should be invested in